The Credit Crisis

The current credit crisis, which is as widely known as the Giants Super Bowl win, continues to plague our economy. However, many people and even some investors do not really know what the current state is regarding debt and the insurance of. Jim Jubak wrote a great article highlighting the current state of the credit crisis and what the banks, the Fed, and the state of New York are doing about it. Jubak predicts that these facilitators will be able to solve our problems in the near term (not without significant write downs, of course) and return our economy back to it's normal growth rates. If Jubak is right there will be massive write downs in the next year or so and then the economy will get back on track.

As an investor I have been looking at various financial companies and many of them are quite cheap with regard to traditional metrics, but I am just not sure how many more write downs will occur. Frankly, I don't think anyone knows. The one company that I have examined as a potential investment in the financial industry is Goldman Sachs. This company is the best at what they due and successfully avoided the whole sub-prime mess, but now there is even talk that this financial bank another 2.7 billion dollars in loans and credit derivatives. Also, analysts are slashing their forward looking earnings estimates by large margins and the company is slashing its work force at a rapid rate.

I do think that Goldman is a great company with excellent long term potential, but I don't believe now is the time to build up a position in the financial giant.

For now I am shying away from the financials. In the future, as the credit crisis plays itself out I definitely will give Goldman a closer look.